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International Business Contracts

During the past two decades, we have seen companies who had seemingly solid contracts to conduct businesses in a country have their contract obligations seemingly reworked in order to give more favorable terms to the host country. Russia and Chevron had a joint pipe line venture in which Russia reworked the contract. Kuwait pulled out of a financing deal with Dow Chemical to purchase a specialty chemical company. Venezuela attempted to nationalize the oil industry which includes US companies. Currently, there are other South American countries who are looking at what Venezuela has done in the past and considering the "taking" of American properties for their own use and profit (with no purchase of said properties). What is this saying about the climate of concern for American businesses in terms of whether they should continue global business relationships in certain countries or should they rethink their global strategy?

1. Identify and discuss ways companies need to structure deals to minimize these types of surprises.
2. Is there anything that a management team can do to minimize these risks?
3. Are there certain laws and/or regulations that these companies need to consider for current and potential business in overseas locations?
4. Please consider how contracts are important to the daily operation and survival of overseas business operations.

Solution Preview

In considering the climate of concern for American businesses in terms of whether they should continue global business relationships in certain countries or should they rethink their global strategy, the U.S. corporation should, according to David (2011, p. 337), secure a better understanding of the cultural, historical and religious factors that define the population in other countries.

A management team might consider for example that in China, business behavior revolves around "guanxi", or personal relationships as a way to minimize these ...

Solution Summary

International business contracts are examined. Why companies need to structure deals to minimize types of surprises are determined.

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